The head of Network Rail has become the latest taxpayer-funded executive to be forced to waive a bonus after his company announced that he and five fellow senior managers would not be seeking a payout this year.

Sir David Higgins, the chief executive of the state-backed company, was one of six Network Rail bosses who were due to discuss a possible "incentive scheme" at an annual general meeting on Friday. Higgins was expected to collect a £340,000 bonus in addition to his £560,000 basic salary.

The announcement on Monday followed immense pressure from Labour and ministers for executives in publicly owned companies to waive bonuses, following a public backlash over large payments made at a time of stringent government cuts.

Justine Greening, the transport secretary, had taken the unprecedented step of saying she would attend the meeting to oppose the plans. She also planned to tackle the company's "corporate governance" by appointing a special director from the department.

The transport secretary said the firm's decision to rethink a future remuneration scheme was "sensible and welcome".

"I have made it clear to Network Rail at every stage that this proposed package did not go far enough in reflecting the need for restraint," said Greening.

DTI insiders claim that she first told Network Rail's senior figures that they should not expect bonuses in November this year.

"The fact that its executive directors have also chosen to forfeit their annual bonuses to charity is a sign that they have recognised the strength of public opinion," she added.

Labour had accused Greening of failing to use her powers to halt the bonuses altogether. The shadow transport secretary, Maria Eagle said: "It took Labour's intervention to force ministers to take this issue seriously. Justine Greening was still refusing to stand up for the British public and veto this proposed bonus plan when Network Rail managers took the decision for her."

Eagle said the government should now sit down with Network Rail to agree whether a bonus scheme of this scale was appropriate in a company funded by the taxpayer.

"At a time when so many families and rail commuters are being squeezed financially, when fares are rising by up to 13% and the rail network is performing inadequately, it was completely wrong for bonuses of this scale to have been even considered, let alone agreed," she said.

In a statement released by Network Rail, Higgins said the decision to waive this year's bonuses was made last week and that the meeting had been suspended. Instead, future bonus schemes will be discussed at a meeting yet to be scheduled.

The company could not say, however, if Higgins and fellow executives will continue to share in a long-term bonus scheme that could be worth up to £15.6m over the next three years for the rail group's six executive directors. The six will also earn £2.3m a year in salaries plus a maximum of £4.2m in bonuses.

This year's money will instead be diverted to a safety improvement fund for level crossings, Higgins said.

"I and my directors decided last week that we would forgo any entitlement and instead allocate the money to the safety improvement fund for level crossings. I can confirm that remains our intention," he said.

The statement said that the board of Network Rail had decided to recommend to its members that Friday's meeting be adjourned. "The board will take the opportunity to reflect further on how to incentivise performance in the company against the backdrop of the current context. It will continue to consult the secretary of state on wider issues of governance in advance of the government's command paper," it reads.

Network Rail's chairman, Rick Haythornthwaite, said in the statement that Friday's meeting was not to approve a specific annual bonus payment for executive directors, but was supposed to amend a previously approved long-term incentive scheme to ensure additional external scrutiny of performance.

"The issue of annual performance payments would only arise if Network Rail surpassed stretching performance thresholds and would only be decided in May after the end of the financial year."

The development comes a week after Stephen Hester, the chief executive of the Royal Bank of Scotland, which is 83% state-owned, waived a bonus package of almost £1m after a public backlash.

More than 20 MPs have signed a Commons motion saying Network Rail had been "found by the Office of Rail Regulation to be in breach of its licence" and had been responsible for "major asset failures, congested routes and poor management of track condition".

Last week, the company admitted health and safety breaches over the deaths of two teenagers killed at a level crossing in Essex in 2005.

Downing Street said ministers were not permitted to interfere in the "day-to-day running" of the firm, which receives £4bn of taxpayer funding a year and is guaranteed by the government.

But it said it would be looking at its corporate governance in the light of "problems" that had arisen.

Industry sources have accused politicians of using the issue of bonuses as a political football. "It is ridiculous. We are at risk of losing some our best brains because of a political witchhunt," the source said.